Cherry-picking of employees in a reorganisation by transfer under judicial authority: is it still possible?

The Antwerp Labour Court recently ruled that the acquirer’s right of choice in the context of a CEA III procedure is contrary to EU law. It ordered the Belgian State to pay damages to an employee not taken over by the acquirer.

Belgian legislation on judicial reorganisations specifies that, in the context of a transfer under judicial authority (“CEA III” procedure), the acquirer can choose which employee(s) it wants (or does not want) to take over (old article 61 Continuity of Enterprises Act and article XX.86 Economic Law Code).

Ms Plessers filed a lawsuit after she was not transferred under a CEA III procedure. The case led to a preliminary question to the Court of Justice. The Court ruled on 16 May 2019 that the right of choice in the case of a CEA III procedure conducted with a view to retaining all or part of the transferor or its business violates Directive 2001/23/EC on transfers of undertakings (Case C-509/17).

In its final judgment in this case dated 24 March 2021, the Antwerp Labour Court confirmed that the right of choice violates Directive 2001/23/EC: this Directive only stipulates that employees can be dismissed on economic, technical or organisational grounds, but not that an acquirer could choose which employees (not) to take over.

The Labour Court ordered the Belgian State to pay compensation to Ms Plessers for the defective implementation of the Directive in Belgian law. The court assessed the damages not on the basis of the legal severance pay, but on the basis of the loss of an opportunity. It took into account the technical, organisational and economic reasons given by the acquirer for not taking over Ms Plessers, and granted her limited compensation of EUR 1,000.

As long as the legislator does not amend the CEA III rules, the Belgian State thus exposes itself to liability claims. A proposal for legislation dated 21 October 2020 introduced by Mr Koen Geens aims to replace the reference to CEA III with a reference to a “judicial reorganisation through the orderly liquidation of the company by transfer under judicial authority”, i.e. with the focus on the liquidation and not on the continuity of the company. This would entail the implementation of the exception allowed by the Directive to the principle of preservation of the rights of all employees in the event of a transfer of undertaking, particularly in the event of bankruptcy or similar proceedings aimed at liquidating the assets of the transferor under the supervision of a competent public authority. However, according to our information, the proposal is no longer on the agenda of the competent legislative committee. It is expected that the proposal will continue to be discussed as part of the implementation of Directive 2019/1023 (the Restructuring Directive) into Belgian law.

As a (potential) acquirer, what should you remember at this time in the context of a CEA III procedure?

  • It is advisable to justify on the basis of technical, organisational and economic reasons why you are (not) taking over certain employees and to document this choice.
  • As long as the legislation has not been amended, in principle, only the Belgian State can be held liable for the non-EU-compliant CEA III rules.